Budgeting and Savings Tips

News and Articles

  • International Delegation Visits UMB to Improve Financial Literacy via The Elm

Six Ways to Track Your Spending
In addition to the intricacies of your chosen course of study, you will need to learn something else during your time at UMB: How to live on a fixed income.

Since your income figure will more than likely remain fixed during large parts of your graduate or professional school experience, there may be little to no wiggle room with how much comes in. However, there are plenty of alternatives to arriving at how much cash goes out.

We have put together a list of popular expense tracking methods for you to explore, along with their positive and potentially negative traits.

1. Receipts

This method involves keeping your receipts from every purchase (or ATM transaction) and totaling the receipts periodically. At the end of each period (daily, weekly, pay period, etc.), sort the receipts by expense category and record the transactions in a notebook or spreadsheet. Compare the totals against your budgeted amount for each category.

Plus: Receipts provide a paper trail. You will get an honest look at your spending habits. You can use the receipts to fine-tune your budget. 

Minus: Not all merchants give receipts without being asked. The gap between when a transaction occurs and when the transaction is recorded allows time for losing receipts or forgetting to record them altogether. If the observation period is too long, one may easily go over spending limits for each category.

2. Envelope

This system starts with your budget. After paying large, fixed, and/or recurring items such as rent/mortgage, utilities, and car notes, you arrive at the amount of cash you have left to spend each month. Make an envelope for each category of your cash expenses. Set a dollar limit for each category and put the cash in the corresponding envelope. Once you have spent the cash in your envelope, your spending for the category is done for the month (in theory).

Plus: You can have your cash balance (and your balance in each category) at your fingertips. You also can see each balance decrease as you spend, which you cannot see when you use a debit or credit card. By using cash, you also avoid ATM and overdraft fees.

Minus: This method can get messy if you don’t have a safe place to carry your envelopes. If you lose an envelope away from home, chances are it will not return!

3. Calendar

Use this method to manage large recurring payments and infrequent expenses by writing their due dates on a calendar. Some common expenses that may be billed quarterly or semiannually include water, alarm monitoring, and auto insurance premiums. Other expenses that may arise infrequently include car maintenance and routine visits to a physician and/or dentist.

Plus: This method helps you plan in advance for the infrequent expenses you may forget about. Seeing all due dates on one calendar can help you be prepared as opposed to surprised when the bill arrives.

Minus: You will have to use this method in conjunction with another method to have a complete picture of your expenses. Infrequent expenses may have wide ranges (i.e., going in for an oil change and being told you need new brakes, spark plugs, etc.).

4. Checkbook

This system is the original running tally of income vs. outflows. If you receive your pay via direct deposit, be sure to check with your bank for the exact amount of the transaction before recording it in your checkbook register. Ideally, you can record transactions as they occur, adding inflows and subtracting outflows as you go.

Plus: The register comes ready-made with your checkbook. It provides an existing template for recording transactions, so all you have to do is fill in the blanks and work through a bit of simple math.

Minus: It is easy to forget to record a transaction. It also is easy to forget your checkbook, especially if you use a debit card for most transactions. If you want spending figures by category, you will have to do some sorting on the back end.

5. Notebook

This system is a hybrid of the envelope system and a checkbook register. Each time you spend cash, record the transaction with a label designating the category. Each category has a limit or an expected amount before you begin spending and as you spend, you can subtract the expense from the budgeted amount for the corresponding category.

Plus: Similar to a checkbook register, this system allows you to record expenditures as they occur with the added benefit of sorting by category at the same time.

Minus: Unless you record transactions frequently, it may be easy to miss one. Just like the checkbook, you must not leave home without it.

6. Computer

Several companies offer software packages that provide record-keeping and analysis functions for your finances. Popular examples include AceMoney and Quicken. Software packages will cost you, but some companies offer free online money management tools as well.

Plus: You never have to do the math. These products provide you with quick analysis of your spending habits. “What if” projections and long-term planning may be just a few clicks away.

Minus: If you use an online outlet, you must give the site permission to access your personal information. Before enrolling in an online tool, check with your bank to see if it has an online banking equivalent.

The Bottom Line

Your Income – Your Expenses = Your Surplus or Your Deficit

The part of the equation that matters most is you! You will need to find the method that works for you and your money. No method is guaranteed to work for everyone, but when it comes to tracking your money, using any of these methods is better than using no method. 

Disclaimer: The contents of this article are for informational purposes only. Any mention of a product does not constitute an endorsement by the Office of Student Financial Assistance nor the Office of Financial Education and Wellness.

New Debit Card Fees
Oct. 7, 2011: Last week, Bank of America made headlines with the announcement of a new $5 monthly fee for debit card users.

According to a bank spokesperson, the fee will be levied “each billing cycle in which a customer uses a debit card to make a purchase.” The bank has yet to disclose the order in which states will begin seeing the fee, but the fee will be phased in during early 2012.

Bank of America is not the only bank looking to charge checking accountholders for debit card use. In fact, other banks have already started. SunTrust began charging a $5 fee for debit card users in June. Chase and Wells Fargo are testing smaller fees in select markets.

Why the new fee? New legislation.

Each time you use your debit card for a purchase, the merchant pays a swipe fee to the bank that issued your debit card. Prior to Oct. 1, 2011, banks charged merchants a 44-cent fee per transaction. The fee has now been capped at a maximum of roughly 24 cents per transaction as per the Durbin Amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Many banks have imposed new fees on debit card users to replace the revenue they expect to lose as a result of the new cap on debit card swipe fees.

The facts:

  • If you use your debit card to make a purchase, you will be charged one $5 fee for the billing cycle in which the purchase occurred (typically, a billing cycle is roughly one month).
  • If you do not use your debit card during a billing cycle, you will not be charged the $5 fee for that billing cycle.
  • The fee does not apply to ATM transactions.
  • The fee is a flat fee. This means the fee will be $5 if you use your card once or 100 times during a billing cycle.

What you can do:

  • Shop around. When it comes to choosing a bank, we encourage you to shop around. Compare prices, services, account options, and features offered by several banks and select the bank that best suits your individual circumstance.
  • For a comparison of the 10 largest banks and their current fee structures regarding checking accounts and debit cards, click here. These figures are subject to change, especially given the current legal and economic environment surrounding the banking industry.
  • Contact us. If you have inquiries regarding your banking options, please email your questions to FEWTalk@umaryland.edu.  
  • While the Office of Financial Education and Wellness cannot recommend any particular bank, we can discuss your needs and help you review your options.

NOTE: Banks may increasingly encourage you to use your credit card for ordinary purchases because credit card transactions incur swipe fees just like debit cards. However, the new cap on swipe fees does not apply to credit cards.

We do not encourage the use of credit cards as an alternative payment method to avoid debit card fees. Unlike debit card transactions, credit card purchases create debt. Credit card debt is subject to interest that accrues daily, and unless the balance is paid off — in its entirety — every period, using credit cards for purchases can prove far more costly!

Note: Since publication of this post, Bank of America has abandoned the proposed $5 monthly fee for debit card users. Even though this specific fee was not implemented, it is important to be mindful of your bank's fee schedules, as the fee structure for bank products and services offered in conjunction with your account (s) are subject to change. Pay attention to correspondence and fee schedules from your bank to remain aware of any changes to your account, how it is serviced, and how much it will cost you.